Ami Organics - Pharma Intermediates & Specialty Chemicals

I saw there is an existing new thread on Ami Organics which is closed. The person who started is not updating the same so that it can be opened, I guess. Since I intend to provide more information I am hoping this one remains open. Alternatively I can move this information there if that thread is opened

Incorporated in 2004, Ami Organics is an R&D (R&D) driven manufacturer of specialty chemicals with varied end usage, focused on pharma intermediates for regulated and generic APIs and new chemical entities (NCE) and key starting material for agrochemical and fine chemicals, especially from recent
acquisition of the business of Gujarat Organics Ltd. It is one of the major manufacturers of pharma intermediates for certain key APIs, including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban. It has three manufacturing units at Sachin, Ankleshwar and Jhagadia

Company IPO happened in September 2021 at Rs610. Stock currently at Rs1130/share

Industry Analysis
The global chemicals market is valued at around US$4,738 bn in 2019 with China accounting for major market share (40%) in the segment followed by European Union (14%) and US (13%). India accounts for ~3.5% market share in the global chemicals market. The global chemicals market is expected to grow at 6.2% CAGR; reaching US$6,785 bn by 2025.

Going forward, APAC is anticipated to grow at the fastest rate of 7-8% during the forecast period (2019-25F). The chemicals markets in Western Europe, North America and Japan are relatively mature and, hence, are expected to record slow growth rates of around 3-4%.

The Indian chemicals market is valued at US$166 bn (~4% share in the global chemical industry) in 2019. It is expected to reach ~US$326 bn by 2025, with an anticipated growth of ~12% CAGR. The specialty chemical industry forms ~47% of the domestic chemical market, which is expected to grow at a CAGR of ~11-12% over the same period.


Company Analysis
Some of the AMI’s products such as Pharma Intermediates command a significant market share both in India and globally
:black_small_square: AMI recently completed the acquisition of two additional manufacturing facilities operated by Gujarat Organics Limited which has added preservatives other specialty chemicals in our existing product portfolio, which command significant market share globally in the supply of certain paraben derivatives.
:black_small_square: Company has a Strong and long-term relationships with numerous domestic and global pharmaceutical companies
:black_small_square: During FY21 Company export contributed to 52% of revenue from operations
:black_small_square: 8 process patents published(1) along with 3 additional pending process patents(2)
:black_small_square: Raw Material Sourcing: ~73% of RM is sourced from domestic vendors as of FY21

Key risks & concerns
 Higher RMAT cost, inability to pass on to impact performance: The company’s primary raw materials include ethyl alcohol, dimethylformamide, isopropyl alcohol and toluene. It does not have long term agreements with most raw material suppliers. The company’s inability to correctly forecast demand and supply may have a material adverse impact on working capital, business and results of operations
 Loss of customer to impede performance – Loss of customer or lower business growth from large customers owing to intense competition can impede the growth of the business
 Regulatory related challenges for any plant to hurt performance – Since the company operates in intermediates for pharma API, it has to follow stringent norms as per USFDA and REACH certification.
Any irregularities can result in a ban on manufacturing activities and thereby impact the financial performance of the company


Latest PPT

Publically available broker research

Red herring prospectus

Latest management interview

Latest results conference call transcript

Disclosure: Invested

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Let us try and calculate Ami Organics FY22 profits and make some sense of valuations
Please note all the management guidance and quotes have been picked up from the 2QFY22 confererence call which I have shared above

1HFY22 revenues were Rs235.4crs. Out of this Rs39.4 crs is from Gujarat Organics acquisition. So Ami (ex GOL is Rs196crs). During April and May operations in GOL was minimal.

According to management in a normal years Q1 < Q2, Q3 < Q4. Generally 1H contributes 40-45% of full year revenues

By this logic Ami (ex GOL would be) would be between Rs196crsr/45% - Rs196crs/ 40% = Rs436crs - Rs490crs. Coming to GOL management has said FY22 revenues would be closer to Rs110crs similar to that of FY21. So overall Ami Organics will do between Rs546 - Rs600crs in FY22 revenues v/s Rs341crs in FY22

Now first 1HFY22 revenue was Rs235.4crs. So 2HFY22 revenues would be between Rs311crs - Rs365crs. Management has said 2H margins will be higher as GOL facility which was utilized 40% will get utilized more as it ramps up and anyway 4Q has higher revenues and give operating leverage. Further debt of Rs136crs has got repaid in 2QFY22. So assuming PAT margins of 15% one can expect 2HFY22 PAT of Rss47crs - Rs55crs.

This implies FY22 PAT of Rs78crs - Rs86crs. Company has market cap of Rs4048crs. So stock trades at a P/E of 47.1 - 51.8x. Beyond FY22 company guides for 25% annual growth. PAT margins will definitely expand as margins in GOL go up as capacity utilization ramps up. So you can potentially look at 30-35% PAT growth post FY22.

Now lets look at some comparables
On an absolute basis India Chemical is not cheap.

Clean Science - FY22 P/E 94.1x
Tatva Chintan - FY22E P/E 59.8x
Neogen - 63.7x
PI Industries - 50.1x
SRF - 42.2x
Aarti Industries - 45.6x
Vinati - 54.6x

Now some companies might grow inline with Ami, some will grow slower than Ami, but I doubt there are many which will grow faster.


Great post @vnktshb Sir. Here is a detailed management interview for those who are interested.

I have some questions:

  1. Is it right to say that the specialty chemicals division is basically backward integration for pharma intermediates?
  2. If so, how much of the total specialty chemicals production is for captive use?
  3. Management had mentioned that Gujarat Organics has a patent on a very important catalyst. What is the expiry date of this patent?
  4. I believe Ami’s strategy is to develop and commercialise the molecule even before it goes off-patent, so what is the magnitude of risk from patent evergreening?
  5. From what I understand (please correct me if I am wrong) Ami develops molecules even during the clinical trials phase. But what if the molecule does not pass clinical trials?
  6. Follow up on question 5: what is the approval rate in the clinical trials for their target segment?

Also, I could only find Ami’s FY21 AR on their website, not previous years ARs. Are they available anywhere? Thank you.

Disc- no holdings but researching and tracking closely


Anand Rathi

Ami Organics (Buy)

Target: ₹1,354

CMP: ₹1,057.7

Ami Organics is one of the major manufacturers of pharma intermediates for certain key APIs, including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban that find application in certain high-growth therapeutic areas, commanding significant market share both in India and globally.

During the half year results the company posted a growth of 51.1 per cent in its consolidated revenues at ₹235.40 crore (including ₹40 crore from GOL in H1FY22, H1FY21 numbers don’t include GOL numbers,). The operating margins stood at 21 per cent at ₹49.50 crore while the PAT margins stood at 13.2 per cent at ₹31.20 crore. The company’s business is backed by strong and diversified product portfolio ably supported by strong R&D and process chemistry skills, which enables it to create entry barriers in the chemicals manufacturing industry.

Going ahead, the company plans to increase utilisation levels at its newly acquired facility and further to incrementally add capacities to aid growth through launch of new products and increase in volumes in existing products.

With presence in high growing and niche markets Ami Organics Limited is set to continue to post better growth in the mid term. We initiate our coverage on the stock with a Buy rating and a target price of ₹1,354.


Latest publically available note based on management interaction

What is interesting is this, “Management expects revenue to grow at 24% CAGR in FY21-23E with the support of spare capacity utilization of Surat plant and new revenues from the acquisition of GOL plants on slump-sale basis”.


Revenues up 54% Profits up 35% YoY. EPS up 23% YoY. 9MFY22 EPS up 31% YoY


Indian chemical industry witnessing strong export traction
Ramp-up in chemicals capacity utilisation to aid near-term growth
EC clearance for pharma products in Ankleshwar supports medium-term opportunity
Expertise in piperazine chemistry that contributes to oncology products
Valuation reasonable, post correction



recently company anounce the capex 190cr brown field capex , and they stated that they are going to demolised the existing structure , my que. is that they are demolising the existing structure is that plant is closed from long time or they sort of generating the small revenue for company ? basically i want to know that after demolising the structure how much revenue will go down .

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They already shifted the operation of the existing running plant. Hence no revenue losses.

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Management says there is seasonality in their business with Q1 being the weakest quarter and revenues growing sequentially in Q2 – Q3 – Q4 and Q4 being the best. Anyone knows what is the reason for this seasonality, given that 91 % of their products from the pharma basket cater to chronic segments and less than 10% to acute?

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Observations from Ami Organics Annual Report FY22 (qualitative):

  1. The company is engaged in manufacture of intermediates for regulated and generic APIs, NCEs and KSMs for agrochemicals and fine chemicals. Majority of the business is in API space focused on chronic therapies. It typically produces products ranging from the N-1 to the N-8 stage. Three key products/services of the company are listed as 1. 1-(3-Chlorophenyl)-4-(3-Chloropropyl) Piperazine Hcl, 2. 1-Phenyloxindole and 3. 2h- [1,2,4] Triazolo[4,3-A] Pyridine-3-One

  2. During the year, company raised Rs.300 crore via IPO at a price of Rs.603 per share. Of this, Rs.200 crore has been utilized for debt repayment (Rs.140 crore) and working capital purposes (Rs.50-60 crore) with the balance yet to be used.

  3. Successfully commercialized a few products using continuous flow technology during the year, which validates its industry-leading technical capabilities (claims the Annual Report). 17 new products were added during the year. New customers added are 30 in API and 10 in Speciality Chemicals

  4. It has one process patent granted, seven process patents published, while four process patents are under review.

  5. The company’s strategy is to keep a pipeline of products ready which are expected to be launched 10-15 years down the line. This gives it the first mover advantage and secures a place in the DMFs of its customers. R&D expenditure as a percentage of sales is 1.35 %.

  6. Almost 64% of raw materials are sourced within India, 27% from China on overall basis and 19% in pharma intermediate business. Inventories have doubled during the year, but the main increase is in RM.

  7. Last year, it acquired Gujarat Organics (GOL). GOL had two plants – one at Jhagadia and one at Ankleshwar. The GOL acquisition opened 600+ doors (customers) for the company. The company has shifted the existing machinery at Ankleshwar to Jhagadia and production is happening from there.

  8. But the Jhagadia site still has a parcel of land available for future expansion.

  9. No major capex was done during the current year. However, Board has approved a capex of Rs. 200 crores to restructure the Ankleshwar production facility and utilize the same for expansion of pharma Intermediate business to support future growth. Planning, design and engineering for proposed capex is under preparation. The company has already received Environmental Clearance for the project. This expansion will drive business growth FY25 onwards.

  10. The company has forayed into Electrolyte Additive and become the first Indian and global company outside of China to successfully develop core Electrolyte Additive for cells used in energy storage devices. It will be the only manufacturer of the product outside China.

  11. A new business vertical of import substitute products has been created.

  12. Revenue contributed by Top 10 customers is 54%

  13. The Company has not provided any Stock Option Scheme to the employees.

  14. Promoter is not present on the Audit Committee or the NRC. However, promoter remuneration has shown a huge jump from Rs.3.6 crore to Rs.8 crore and is 11% of the PAT which is quite high.

  15. Contracts with Related Party includes payment of rentals for providing parking space to company, aggregating to Rs. 3 crore during FY 2021-22.

  16. Official Promoter stake is 41% which is low. However, Virendra Nath Mishra and various members of the Chovatia Family appear in the Top 10 non promoter shareholders. They can be considered as family / friends and hold a collective stake of more than 25%. (My comment: This is both good and bad. Good because it takes the effective promoter stake to above 65% which provides comfort. Bad because these shareholders are privy to inside information and yet not subject to various regulations and disclosure norms related to Promoters.)

  17. Company paid penal interest on various income tax and statutory dues to the tune of Rs.36 lacs.

  18. The company has invested Rs.31 crore in a JV Ami Oncotheranostics LLC in the U.S. This company is engaged in commercializing, manufacturing, marketing and selling its pharmaceutical products, says the AR. Revenue of this company is not disclosed but it made a loss of Rs.12 lacs. (My comment: Not clear what this JV is doing and who is the other 50% partner)

No recommendations.

(Disc.: Have a small position.)


Point No 10 why do they want to get into an unrelated business something wrong here

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Electrolyte additives are chemicals and Ami Organics is a chemical company. I agree that they are venturing outside Pharma intermediates but they are not trying to do something outside their core competencies.


Ami Organics Q1 FY 23 results -Press release

Q1FY23 Revenue up 15.8% YoY, EBITDA up 7.1% YoY PAT up 8.3% YoY

Commenting on results, Mr. Naresh Patel, Executive CMD said: “I am happy to share that we have entered the new financial year on a positive note amidst a challenging global environment. Our Revenues for the quarter grew steadily at 16% on a YoY basis to Rs. 131cr. This was driven by the export market and specifically innovator-driven business.
Our gross margins improved for the quarter due to a better product mix, cost optimization
measures, process improvement measures, the use of new technology, and most importantly
our ability to pass on the incremental cost to our customers.

The EBITDA margins remain stable on a sequential basis weighed down by higher energy prices and lower EBITDA of the specialty chemicals business.

Electrolyte additive samples are with customers across the world at various stages and commercialization of the product towards the end of this year.
Planning to launch two new products under the import substitute business vertical which are in the Agrochemicals space. Commercialization of the same in the 2nd half of FY23.

Overall, even though we are seeing some demand rationalization for the pharmaceutical
industry, our core products continue to see strong demand and that makes me optimistic
about delivering sustainable growth for the financial year 2023.”

Key Results Highlights (Consolidated):

 Revenue from operations for Q1FY23 grew by 15.8% YoY to Rs.1,310mn.
The gross margin for Q1FY23 improved to 48.8%, an increase of 572bps on YoY basis and
467bps on a sequential basis. The Margin expansion was driven by a better product mix, cost optimization measures, process improvement measures, and the use of new of technology.
 EBITDA for the quarter came at Rs. 237mn up 7.1% as compared to Rs. 221mn in Q1FY22.
 EBITDA margins for the quarter were at 18.1% as compared to 19.5% Q1FY22 and 18.0%
in Q4FY22. We have been able to maintain our EBITDA margin on a sequential basis
which is suppressed due to higher energy, and freight cost as well as lower EBITDA margins
of the Specialty Chemical business.
 PAT for the quarter was at Rs. 149mn up 8.3% on YoY basis. The PAT margins for the
quarter were at 11.3% as compared to 12.1% in Q1FY23.
 In Q4FY22, Company received a TAX benefit which resulted in a 4% tax for Q4FY22. This
led to a higher PAT margin in Q4FY22. If you remove the impact on Tax benefit, PAT for
Q1FY23 is maintained on a sequential basis.

Key Business highlights:
 One-off expense of loss on sale of the asset is related to the demolition of the civil structure at the Ankleshwar site.
Electrolyte additive update:
o China: First samples sent to clients are approved. Larger samples are sent to the client which is at an advanced stage of qualification.
o Europe: Sent samples to customers for the initial approval
o India and Korea: Engaged with several customers for the product
Import Substitute Product Updates: Plan to introduce two new products in the current
financial year which will cater to the Agrochemicals industry. Expect to commercialize
these products in the second half of the fiscal year.
 We have ordered flow reactors for a couple of more existing products and expect them
to shift to continuous flow in the second half of FY23.

Capex Update: Company has received Environmental clearance. Excavation work is
completed. Civil construction is started. Started ordering machinery for the plant.

Investor Presentation:
2d27d16a-1243-4973-96b6-488f82075a49.pdf (

Q1FY23 results:
8c59d867-a9e6-4c2c-a8b3-e04f43d17e78.pdf (

A company trading at trailing 50x PE giving such a paltry profit growth is worrying…

Concall Q1FY23

Discussion on Electrolyte

As per the professional estimates on global demand of Electrolyte and their projected market share of 10%, Electrolyte may contribute Rs 1600 crs by 2028. Considering other business contribute a topline @ CAGR of 20% (conservative estimate, they project a 25% growth), estimated revenue in 2028 might be Rs 3200 Crs.

Seems to be a steady compounder.

Full text of Concall Transcripts
e4c6d0dc-fc43-4c4a-acab-bab9f25b0214.pdf (
Discl: Invested and naturally I am biased.


Promoters (some of them classified as public but apparently close to the promoters) sell 5.21 % of the company’s equity today:


Mgmt giving more clarity on the nature of the stake sale and general discussion on future.

Q3FY23 Results Press release.
Q2FY23 Revenue up 20.2% YoY,
EBITDA margin improved by 107bps to 19.1% QoQ
PAT margin improved by 161bps to 13.0% QoQ

Commenting on results, Mr. Naresh Patel, Executive Chairman & Managing Director, said:
“We continue our robust trajectory with 20% YoY growth during Q2, primarily driven by a significant increase in the Advanced pharmaceutical intermediate business which grew by 25% YoY. That said, the Company witnessed a flattish growth in the specialty chemicals business.
Margins continue to strengthen as we keep tight control on cost as well as because of lower freight rates. I believe margins will continue to see the improvement in coming quarters.

We have successfully developed Methyl Salicylate using flow technology which is expected to commercialize from Q3 onwards. This shift in manufacturing technology has resulted in a considerable reduction in production time, 3x capacity expansion, and cost savings of around 5-7%.
Electrolyte additives continue to see good inquiries from clients across the globe and we expect
to commercialize the product before the end of FY23.
Overall, I remain optimistic about our business growth in the coming quarters and years on
the back of various strong growth levers.”

Key Results Highlights (Consolidated):
✓ Revenue from operations for Q2FY23 grew by 20.2% YoY to Rs.1,470mn; Sequentially
revenue grew by 12.2%
✓ The Gross margins for the quarter were at 48.0% as compared to 54.0% in Q2FY22 and
48.8% in Q1FY23.
✓ EBITDA for the quarter came at Rs. 281mn up 2.8% YoY compared to Rs. 274mn in Q2FY22
and up 18.8% on a sequential basis compared to Rs. 237mn in Q1FY23
✓ EBITDA margins for the quarter were at 19.1% as compared to 22.4% in Q2FY22 and
18.1% in Q1FY23. We have been able to improve our EBITDA margin on a sequential basis
due to improvements in operating expenses whereas lower EBITDA margins of the
Specialty Chemical business continue to put pressure on consolidated EBITDA margins.
✓ PAT for the quarter was at Rs. 190mn up 9.0% on YoY basis. The PAT margins for the
quarter were at 13.0% as compared to 14.3% in Q2FY22 and 11.3% in Q1FY23.

Key Business highlights:
✓ Export at 58%; domestic business at 42%
✓ Specialty Chemicals – Methyl Salicylate:
Successfully developed Methyl salicylate using Flow Chemistry. Successfully erected
Flow reactor at Jhagadia plant and expect to start production from Q3FY23.
This will result in increase in volume capacity by 3x and cost saving of 5-7%

Electrolyte additive update:
o Expecting commercial trial order in November 2022
o Products are in various stages of qualification with customers in China, Korea, India, and Europe
o Expecting commercial orders to start from the first half of the calendar year 2023

Import Substitute Product Updates:
o Received trial order for agrochemical intermediate. Expect to commercialise the
same in Q3FY23
o Received trial order for pharmaceutical intermediate from European client and expected to commercialise the same in Q3FY23

Capex Update: Company has received Environmental clearance. Excavation work is
completed. Civil construction is Started. Started ordering machinery for the plant.